The “product life cycle” concept was first introduced by the marketing rock star Theodore Levitt in 1965 in his classic Harvard Business Review article. 55 years afterward, we can safely incorporate it into the phrase 'nothing is certain except for death, taxes and the product life cycle'.
It's amazing how an old-school idea remains as relevant as ever for an edgy SaaS market. It offers startups the ability to predict what will contribute to positive growth in the future, instead of learning from the mistakes of the past.
Product Life Cycle: Concept and Strategies
The classic graph for the product life cycle is a sales curve that progresses through four stages:
- Introduction – a sharp rise as a product getting off the ground;
- Growth – a period of the sharpest rise;
- Maturity – a sustained, rounded peak in sales;
- Decline – a gradual decrease in sales that leads to withdrawal from the market.
How do marketing strategies change during the product life cycle? They must develop along with the changes in product, market, and competitors over the product life cycle. Let's consider how product life cycle strategies work with examples of top-notch SaaS companies.
Marketing Strategies for the Introduction Stage
The Introduction stage of the product life cycle starts from the moment when the product or service first comes to market. During this stage, the marketing goal is to create awareness and make the audience try a new offer.
The Introduction is no way the time you want to prolong — it’s the painful moment of big spending, big losses, struggle to break even, and unknowable risks. 92% of SaaS startups fail smashed by the Introduction. If you’re going to spend effort, time and money getting your business off the ground, you better have a go-to-market strategy.
Go-to-market strategy (GTM) is basically a plan of how a company acquires, retains, and grows customers. So what is product life cycle marketing strategies for the first stage?
The theory offers three main GTM strategies: sales-led, marketing-led and product-led. The marketers argue about which one is better. The practice shows you’ll probably need a proper mix of them.
Product-led strategy
Do you remember how your company adopted Slack? I don’t know your story but let me tell mine. Once Max heard about Slack from his friend, started using it with his team and after a while, the whole company was on Slack, and no one had an idea of how it worked before. Sounds familiar, right?
Business software sale algorithms require us to reach the C-suite, hold several rounds (and many months) of negotiations that would be worth a ton of money and give uncertain results. Slack just showed up in the workplace unannounced, with no salespeople, prezzies or calls. End users found the product and asked the boss to buy it.
That’s what we call a successful product-led strategy. The strategy assumes using your product as the main vehicle to acquire, activate, and retain customers. Simply put, you make every effort to create a product that people consistently recommend to friends and colleagues.
In the case of SaaS, the right pricing strategies at different stages of product life cycle can support bottom-up distribution with minimal effort and cash infusions.
Product-led go-to-market strategy fueling the fastest growing software companies, like Slack, Notion and Dropbox. No wonder that “product-led” became a buzzword, often contrasted to old-school “ineffective” sales- and marketing-led strategies. However, marketing is not about abandoning the old and welcoming the new. We know that Max first learned about Slack from his friend. But how, pray tell, his friend knew about the app?
Marketing-led strategy
To support their product development efforts and get maximal exposure Slack worked with multiple PR agencies that promoted Slack’s unique hook: “The Email Killer” in the top tech media. In a short time, the company got published in TechCrunch, The Verge, Fast Company, VentureBeat, Inc.com, etc.
Using traditional marketing channels helps to gain momentum and trigger product-led growth, but it usually costs tons of money. Google Ads PPC prices can exceed $50 per click from the most expensive keywords in competitive industries like law, insurance, loans, etc. $50 per click is not what startups can usually afford, so they go into content marketing.
A smart content marketing strategy can deliver three times more leads than paid advertising and, what is more important, unlike PPC, it creates a compounding effect, where traffic from previously published articles adds to traffic from newer articles.
TaxJar, a SaaS focused on solving a sales tax problem, made helpful content a cornerstone of their go-to-market strategy. The idea of becoming the number one educator in the industry is not something new when we speak about subjects like marketing, where people like Neil Patel and brands like Hubspot ceding the entire space for a long long time. However, entering an industry like tax, you may see a lot of low hanging competitive differentiator fruits on your radar.
Sales led strategy
Slack was designed to sell itself, with its simple intuitive product and a generous free plan. Even though the company has a sales department and adds elements of sales-led strategy as they expand into the enterprise market.
The sales-led strategy works perfectly for B2Bs that sell services, and it’s partially how we find clients for our design services at Eleken. On our very first screen, in the upper right corner, you see the big bright shiny button inviting you to talk about your UI/UX dsign goals and find out how we can help.
Marketing Strategies for the Growth Stage
When the awareness is there, comes the Growth stage of product life cycle, characterized by the sharpest rise in sales. Early adopters continue using the product, and the later buyers start following their lead, especially if they hear favorable word-of-mouth. The first profits are now beginning to come in, the growth curve spikes up.
The sharp rise never lasts long, so at this stage our aim is to climb up the curve as high as possible to maximize a market share.
How the company can maximize a market share during the Growth stage:
- Spend on improving the product and developing new features.
- Enter new market segments and grow sales further by selling through new distribution channels.
- Shifts marketing efforts from making consumers try the product to making them prefer the product.
Though, running uphill, the firm faces a new pitfall — a trade-off between high market share in the future and high profit now. By investing money to gain a strong position in the industry, improving the product and developing new features, it gives up maximum current profit. It’s a necessary sacrifice which the company hopes to make up in the next stage
The second pitfall comes along with the competition. Fighting for a market share is a zero-sum game when the gain for us is exactly offset by the loss of the other players. So you need to knock out the companies that already hold a market share. At the same time, you need to resist the pressure from new competitors that enter the market attracted by the opportunities for profit.
When thinking about product life cycle extension strategies examples, the story of Notion comes to mind first. Now Notion is booming on the market of productivity apps, but long before it appeared, the market already had a visible leader — Evernote. Over the past two years, Notion became viral and managed to shatter Evernote’s position.
Notion also creatively poaches customers from its competitors by boldly calling out unsatisfied users of Evernote to leave their old elephant. They have built a dedicated resource to help such users migrate to Notion in just a few clicks.
Competition is there even for innovative products. If you’re offering a new way of solving a problem, you still need to poach users of an old solution. In the case of Slack-the-email-killer, such an indirect competitor was a habit to use emails for internal communication.
Marketing Strategies for the Maturity Stage
The Maturity phase represents the height of a product’s adoption and profitability. The highest point of the curve here depends on how well the job was done on the Growth stage.
The first sign of maturity is market saturation — when most of the target consumers are already using the product. The aim here is to extend the maturity phase and maximize profit while defending market share.
The maturity stage normally lasts longer than the previous ones, and it poses strong challenges to marketing management. Competitors begin to cut prices, increase their advertising and sales promotions, and raise their budgets to improve the product. These steps lead to a drop in profit. Some of the weaker competitors start dropping out of the industry, and the industry eventually contains only well-established brands.
Let’s consider the example of Evernote. In its heyday, the company consistently ranked as a top-ranking productivity app. But its maturity stage turned out to be pretty dramatic — the company cycled through four chief executives, several rounds of layoffs, three office closings and the shuttering of numerous side projects.
When Evernote’s growth began to slow in 2015, the company tried to identify new demographics for the product and chose to concentrate on enterprise software. However, the product lacked essential features and was complicated to use, so sales of Evernote’s business product never exceeded 15 percent of revenue.
Evernote tried to increase the revenue by inspiring more usage among present customers — but in the wrong way. Unlike Notion, which developed a new feature and asked users to pay for it, Evernote took away some features from the freemium plan and moved them to more expencive editions forcing users to pay more. Needless to say that they were unhappy.
In the meanwhile, the product has developed a “unique collection of bugs” pushing old fans to leave Evernote for more convenient and often free note-taking apps, like Google Keep or Apple Notes. Two years ago, tech blogs declared the company was in a “death spiral” due to flat user growth and a lack of enterprise adoption.
Since then, Evernote has made considerable progress in its new apps, rebuilding them from the ground up and shipping software faster than they have in years.
Evernote’s story represents the full spectrum of marketing ups and downs the company can make struggling to keep the balance on the maturity life cycle stage. In the project’s blog Ian Small, Evernote's CEO, explain product life cycle strategies in his unusually frank blog posts on the company's progress.
Marketing Strategies for the Decline Stage
Sales decline for many reasons, including technological advances, shifts in consumer tastes, and increased competition. The Decline stage of product life cycle may be prolonged, as in the case of malls that quietly ceding ground to online shopping, or rapid, as in the case of foldable paper maps killed by smartphone navigation.
At some point, because of the decline in sales, the cost of running the project exceeds the profit it makes. The management should identify declining products timely to make a decision whether to maintain, harvest for cash or drop the project.
Some companies choose to withdraw the product from the market. The list of projects killed by Google, for instance, numbers into the hundreds.
Those companies remaining may optimize their expenses to the minimum. They may concentrate on the most profitable market segments, drop the prices, and cut down the marketing budget.
There's also an option to modify and resurrect the product, as Steve Jobs did to Apple that almost failed in the 90s. His efforts resulted in one of the brightest business comebacks ever.
To sum up
You never know how long each stage will take or how high the graph will rise. You don't even know whether the project go behind the first stage – as we remember, 92% of SaaS startups fail smashed by the Introduction.
But, knowing your product life cycle and marketing strategies at each stage, you design a proactive marketing approach. You know generally what’s coming next, what challenges you may face, what decisions you should make, and what questions you need to answer to execute timely and successful marketing campaigns.
Top Stories
SaaS Pricing Strategy to Stop Guessing and Start Growing
SaaS startups are bad at pricing. On second thought, I take that back. They actually know how to determine prices for SaaS software. What they don’t know is how to figure out how much customers want to pay. And the difference between the two is quite profound when it comes to effective monetization.
We at Eleken have helped dozens of SaaS companies with UI/UX design and noticed one paradoxical pattern. Startups put acquisition and retention higher than the work on the monetization of their services. They put tons of effort into their home page. The price page they often set once at the beginning and then forget forever.
This is despite the fact that monetization has the most significant impact on the bottom line, leaving retention and acquisition far behind. According to the study published by Price Intelligently, a 1% improvement in pricing results in a 12.7% profit increase. Acquisition and retention affect the bottom line not nearly as much.
It looks like working on how to price your saas product is the most important thing you can do for success. But in fact, for an average SaaS startup, it takes only six(!) hours to decide on pricing. That is not per week or per month — six hours, overall, to set, test and sharpen everything.
The anatomy of SaaS pricing strategy
Pricing a product is much easier than pricing a service. Pricing innovative SaaS service is a hundred times harder than pricing any everyday stuff. No wonder that the SaaS pricing process often reminds of picking numbers out of the air. Guesswork doesn’t count as a SaaS product pricing strategy.
Whatever price you guess, it will fall somewhere between one that is too high to generate any demand and one that is too low to cover expenses. You’ll hardly know if your customers appreciate your service more and you are leaving money on the table. You’ll figure out that you were overpriced only after you scare away a bunch of potential customers.
SaaS companies need some tools to narrow down the pricing search. In this article, we’re providing three SaaS software pricing strategies for you to come to the rescue. Each of them has its place in business, but (spoiler alert) SaaS companies need to pay particular attention to the latter one.
Cost-plus pricing strategy
This strategy embodies what people basically mean by business — selling items for more than the cost of production. It is the most widespread strategy for manufacturing and retailing companies.
Cost-plus pricing's advantages are its simplicity and predictability. It requires no formulas, it doesn't need a deep understanding of your market or your customer. You spend $2 to brew some coffee and want a 50% markup that makes $1. Slap the numbers together and voila, you get $3 and put it on a price tag. You're guaranteed to make that $1 with every sale.
The cost-plus pricing model lacks the flexibility to fit SaaS companies. What if you need to intensify marketing or hire a new employee? The cost may change swiftly. Subscription prices can't be modified all the time to absorb every cost fluctuation, which means the margin will take a hit.
And by the way, why do many startups put so much emphasis on internal cost when determining price? Customers are not interested in your costs. Just like they don’t think about the price of components when buying a bottle of cola, they don’t care about how much you spend on development. Cost-plus pricing may be convenient for a company, but it has nothing to do with customers’ expectations.
If you sell software as a service, the value your products deliver is probably
much greater than the cost to produce them. Start looking beyond your product to stop missing out on money.
Competitor-based pricing strategy
When you enter a new market, you don't usually know how to price SaaS. You don't want your price to look ridiculous when compared to similar offers. You look left to find the lowest price, then you look right at the highest price and take a safe place somewhere in between. Your monetization is competitor-based.
The main advantage of the strategy is, again, simplicity. It takes half an hour to browse the competitors' websites and a bit of math in your head (or a spreadsheet for advanced users) to have the price ready. “So, my competitor’s price is $3, and I will charge the same because they probably did their homework and know that $3 is what the market used to sustain, right?”
Yes and no. On the one hand, it’s a good idea to bear in mind what your competitors charge. Businesses that compete in a highly aggressive space may depend on this strategy completely since a slight price difference defines the users’ choice. Consider you decided to open a coffee-to-go shop. You won’t attract many customers with the price twice as high as the coffee shop next door.
On the other hand, no one ever made a major breakthrough by copying someone else's (not necessarily correct) decisions. You’re probably offering a service that differs from others somehow and has more value than your competitors’ service. Otherwise, why would you stay in business? Putting a price tag based exclusively on matching your competitor, you’re losing an opportunity to stand out, to separate yourself from the others. You’re losing your chances for rapid growth.
Value-based pricing strategy
It's the process of systematically identifying the best opportunities to deliver your audience what matters most. The truth is that the journey has no endpoint. You can never have a good enough understanding of your prospects.
Therein lay the biggest downside of value pricing — its сomplexity. You don’t have all the needed information ready, as in the case of cost-plus. You also have no opportunity to gather all the data in 30 minutes of going through competitors’ sites, as we’ve done with the previous strategy.
Yet, the value-based option is highly recommended for SaaS.
This SaaS model pricing strategy gives you two significant advantages. Firstly, you can charge more than your competitors, given that the audience is ready to pay for the value you’ve prepared for them. While healthy SaaS businesses have a lifetime-value to a customer-acquisition-cost ratio (“LTV:CAC”) of at least 3:1, value-based pricing can kick that ratio far beyond, skyrocketing their growth rate and profitability.
Let's take an example of a social media marketing tool HootSuite. Its cheapest plan was $4.99/month in 2010. Since then, they've updated their pricing year after year to reach the price of $19/month for a starting package, it's almost four times costlier.
Secondly, you can raise prices as you develop new features and add more value to your services. Development costs may stay the same, but as customers appreciate your services more, they will be ready to pay more. Who really cares that Dropbox went from $9.99 to $11.99 per month if the shift was followed by four times more storage offered?
This strategy assumes that you’ve learned your audience and can split it into buying personas to offer every persona a feature mix of its dream. Let’s see how it works for a real-life B2B SaaS pricing strategy.
Slack is one of the most successful SaaS businesses in the world, that hits 12.5 million users, including ourselves. Slack uses freemium pricing to offer a basic set of features for free plus three more upgrade plans. The company splits its offer into packages to fit a wide range of customers: for small and medium, large and very large businesses. Slack knows what features each group cares most (and least) about and includes the list of killing features to each package.
- The Free plan exists to convert interested users. Here you pay $0 but get limited by up to 10 app integrations and only 10,000 last messages available.
- In the Standard plan, you pay $6.67 per person per month to get app integrations and message searches unlimited.
- In the Plus plan, you pay $12,50 per month per person to get enterprise-level services in terms of security, compliance, and administration on top.
- The Enterprise Grid is for companies too big to work in a single workspace. It allows the creation of multiple interconnected workspaces. Pricing for Enterprise Grid is open-ended to fit any company too big for a pay-per-person approach.
We at Eleken do something similar with pricing for our design services. We also have three pricing packages, but in our case, the criteria for differentiating is not the size, but the challenge customers come with.
The essence of the value-based strategy is the continuous work on your target persons' profiles. The results you get are useful not only for pricing but also for product, design, and marketing. A deep dive into the values of your audience will help your team stay focused and make consistent decisions. It will help you prioritize product updates. It will help you avoid feature creep.
To sum up
Your pricing is not a task you can cross off the list when done, it’s a process — a long hike to the top of the mountain. Don't be afraid to start from a “minimum valuable” pricing when you roll out your minimum valuable product. The price is part of your product, so you can develop it together with your service and your knowledge.
Few, if any, big shiny SaaS brands launched with perfect pricing. The best pricing strategies for SaaS are dynamic ones. Mailchimp, Slack, and Hootsuite have all modified their SaaS pricing as they've perfected their core product, with ups and downs, learning what their customers' value and trying to maximize those values in their products.
Compelling Design Takes More Than “Making It Like Stripe”
Eleken’s clients are very, very different. We’ve designed for all SaaS industries you can imagine, from agriculture to data analytics. And even though the companies are very different, their design references are often the same. Our clients want their apps and websites to mimic Intercom, Apple, and, most frequently — Stripe.
When someone asks us to “make it like Stripe,” we explain to our clients why mirroring even the best design is a trap. But if you browse Dribbble for a couple of minutes, you’ll see how many companies walk straight into this trap.
In this article, we’ll figure out:
- Why we all like Stripe’s design so much;
- Why imitation is the sincerest form of failure;
- What really makes Stripe’s design so attractive;
- And how to learn from Stripe in a healthy way.
Why do we all like Stripe’s design so much
Stripe has built a cult around a piece of code. It has turned its users into fans. It has made gradients that look so good you want to lick them. Stripe is the rock star in the world of SaaS, so you’d hardly find a startup owner who has never thought “I want my startup to be like Stripe when it grows up.”
Pretty understandable. You just look at Stripe’s website next to its competitor, Braintree.
Both websites offer a suite of payment APIs for online companies of all sizes. Is it anything more boring to sell than fintech rails for online commerce? Yet Stripe’s site manages to push its boring rails in a very clear, very professional, and somehow even inspiring way.
As designers, we confirm that Stripe’s website is an example of good design.
Our UI/UX designer Maksym compliments Stripe for its clarity. Even though the company offers dozens of products, you can always find what you need. All options are conveniently grouped in a dropdown list and differentiated thanks to their unique icons and color schemes.
Stripe’s copy is sharp and clear, illustrated by telling animations. Animations tell so much that you don’t even need to read the copy to understand how the product works.
Dasha, another designer at Eleken, notes that Stripe presents a unique case when a website is restrained, with no irritating frills, yet it feels fresh and playful.
As you can tell, we at Eleken don’t mind when startups choose Stripe design as a reference. Problems start when inspiration turns into imitation, and clients say something like “make my startup’s website look like Stripe’s.”
Why imitation is the sincerest form of failure
Making your website look like Stripe’s would work if UI/UX design was about making things pretty. But it’s a bit more difficult than that.
Design is a relationship between form and content, so as soon as you separate the form (Stripe’s design) from its content (Stripe itself) to put this form on top of your product, Stripe’s magic turns into a pumpkin.
Think of content as candy and design as its wrapper. The wrapper makes eating candies a better experience — it prevents the sugar from melting in our hands. It also draws customers’ attention.
But if we rip the cover off the best-selling chocolates and pull it on our lollypop, we won’t get a best-selling lollypop. Because it’s not the wrapping that makes candies popular, but a mix of the product and the wrapping. Not to mention the packaging simply won’t fit.
To learn from Stripe’s success it’s not enough to imitate its web design. We need to figure out what’s behind colorful gradients and dynamic diagonals.
What really makes Stripe’s design so attractive?
That’s a good question to ask yourself right after you’ve chosen Stripe as your role model. We believe Stripe’s success is based on three pillars: a valuable product, a human-centered approach to design, and a hard-working approach to the business.
Let’s break them down one by one.
Stripe made a product that relieved users’ pain better than any competitor
Payment processing is complex as hell. Before Stripe, businesses needed to sort things out on their own building compliant payment systems for their sites. That was a risky, expensive and unbearable process. For small businesses, it was often impossible.
Stripe recognized the window of opportunity and enabled people to process payments by copying and pasting seven lines of code. What a delight it was for developers!
Stripe made users’ lives better and earned their love.
Stripe is obsessed with their customers
Customer obsession is like good posture. Everyone knows it’s important but only a few stick with it. Stripe belongs to the minority that builds the business around their customers.
When Stripe had just launched, its CEO, Patrick Collison, went to customers’ houses to see how they installed Stripe. And ten years later, he’s still interested in listening to peoples’ preferences.
Stripe uses gathered insights to constantly improve user experience.
For example, many API products suffer from poor and confusing documentation. Stripe’s documentation, by contrast, is so clear and well-written that it’s easy for developers to get things up and running. What is more, if developers are digging through documents while being logged into their Stripe accounts, they can see personalized code snippets.
Such a user-centered approach earns more love for Stripe.
Stripe always runs an extra mile
If you ask somebody from Stripe’s design team about how they make amazing products and sites, they’d reply they simply spend 20x more time on this than anyone else would. And refuse to cut corners along the way.
Here’s a telling example of this from one of Stripe’s designers. Once he was working on a website animation that showed a payment form being filled and submitted. To fake the typing, he made a new character appear every 100 milliseconds and called it a day.
But the CEO didn’t like the result because typing felt too automatic. He not only suggested making the delay before each new character random but also wrote the needed code by himself. Such serious attention to the smallest detail makes an impression. It inspires all the team to push until the result is not just good or great, but exceptional.
For little details that show that Stripe really cares, users love the company even more.
How to learn from Stripe in a healthy way
The wise lorry from the picture below formulates the moral of our story beautifully: on the road to success, there are no shortcuts.
Maksym from Eleken extends the moral a bit: “People visit Stripe’s site not to enjoy its gradients, but to get their job done. Thus, not an appearance makes a good site, but its ability to give people what they came for in a comfortable and cozy way.”
You can imitate gradients, but that comfortable and cozy assistance is inimitable. To replicate it, you need to figure out who your users are, what their goals are, and how they interact with your product. The deeper you understand it all, the better.
Learning your customers is a great deal of work. If you are ready to get started, our UX maturity article will come in handy. It provides a 6-step algorithm of how an organization can improve their UX processes.
And by the way, did you know that ten years ago Stripe’s CEO wanted his little startup to be like Amazon? He researched things like, what Amazon was doing in 1999, and how they thought about their software and services. That’s a nice little twist of fate, isn’t it?
So if in ten years you’ll be a new SaaS star, recall this article and send some kudos to Eleken design agency.
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